Ms. Moellering, and her husband, Mark, 39, earn average salaries for
their age (together about $66,000 a year), live in an average-priced
home and have an average cost of living. But like many other households
these days, they have found that their day-to-day economic life has
come to depend not just on how much they earn or spend, but also on how
well they shuffle what they owe among a broad array of credit cards,
home equity loans and other lines of credit.

Americans spent one in seven of their take-home dollars on debt
payments last year, up from one in nine in 1980. Experts say few
consumers are able to calculate the true costs of such payments.

Behind closed doors, the decisions families like the Moellerings
make about their debt — when to pay it off, when to shuffle it to
lower-interest sources and when to let it revolve and build — can
determine how much their salaries are worth. Like many others, the
Moellerings have run up avoidable penalties and occasionally spent
themselves into more debt or higher interest rates, even as they have
tried to juggle other balances to bring down their monthly payments.

This spring they allowed a reporter to see how they struggled with
these choices. Ms. Moellering’s basket recently included more unwelcome
news: $2,693 due on a Visa card through her credit union, including
finance charges of $25, and $13,680 on a CashBuilder Elite Visa,
including a monthly finance charge of $200.

Their credit card debt came to $22,228, including $380 in monthly
finance charges. Interest varied from 12.1 percent to 32.24 percent.
The Moellerings also have a mortgage of $93,000 and a home equity loan
balance of $68,574, at 8 percent interest.

Washington Steps In

A column by David Lazarus in the San Francisco Chronicle reports some of what the bill would do:

— Ban interest from being charged for any portion of a cardholder’s
debt that was paid on time during a grace period. As it stands, many
card issuers charge interest for the entire amount put on plastic in
any given period, even if only a small fraction remains unpaid.

— Limit interest rate increases to no more than 7 percent if a cardholder misses a due date.

— Require that any increase in interest rates apply only to future
debt, not what the cardholder may have already run up in money owed.

— Prohibit “pay-to-pay” fees by which cardholders have to pony up
extra cash just for paying their bills by phone or online. …

Yet shortly after the legislation was introduced, the American
Bankers Association responded with “deep concerns” over the provisions
of the bill. …

Ruth Susswein, deputy director of national priorities for Consumer
Action, said it’s remarkable that the banking industry sees the
proposed law as being detrimental to consumers.

“What they’re really saying is that if we toy with their freedom,
they’ll take their ball away,” she said. “The industry threatens to
curb credit any time there’s some effort to end abuses.”

Quashing Debt’s Stranglehold

The Moellerings’ story is painful to read–mostly because they admit
they’ve not taken time to focus on their finances and get hold of their
debt. Instead, it seems debt has a hold on them.

There’s no one-size-fits-all debt solution that every American
consumer can adopt. But consumers and lawmakers can make a joint effort
to improve the situation.

Lawmakers should craft legislation that does away with truly
abusive, misleading practices of credit card companies and other
money-lenders.

In the meantime, consumers should stay educated about their finances
and informed about new policies or practices affecting their debt
loads. They also must spend time charting a financial plan–without
one, finances can too easily get tangled, debt can too easily soar.